Message from General Secretary, All-India Association of Chit Funds

Chit funds are prevalent in India from time immemorial, even before the advent of banking. A recent elaborate study by The Small Enterprise Finance Centre of IFMR, Chennai, under the guidance of Prof. Mudit Kapoor of ISB Hyderabad and Prof Antoinette Schoar, MIT Michigan, under the aegis of Bill & Melinda Gates Foundation, speaks volumes on the strength of this industry. Though the buzzword ‘financial inclusion’ is of recent origin, chit funds have been doing it since inception, catering to the unserved population in remote areas, and are one of the most popular and trusted forms of informal finance. However, it is painful to note that this ancient system is often projected in bad light, and the failure of multilevel marketing companies/ponzi schemes, deposit taking companies, etc., is reported as that of chit funds, whereas the fact is that conventional chit companies cannot and does not accept deposits from the public at all. The need of the hour is to run public awareness campaigns, highlighting the difference between chit fund companies and residuary non-banking finance companies (NBFC) so that the ignorant public does not lose their hard-earned money, as it happened in the case of Saradha. We appreciate the role of Consumer Voice in coming out with an article on the intricacies of this financial intermediary, for the benefit of the investing public, legislators and administrators. Mail at gensecy@aiacf.com